CK Hutchison Holdings has been hit with a 320.32 billion rupee ($5 billion) tax demand in India over the sale of its Indian mobile business to Vodafone a decade earlier.
The demand includes a base tax claim of 79 billion rupees, as well as 164.3 billion rupees interest and a 79 billion rupee penalty, CK Hutchison said in a stock exchange filing.
The company received an initial demand in February and a further notice earlier this month, the filing states. But CK Hutchison has received legal advice that the claim is not enforceable and is therefore expected to have limited impact on its finances.
Indian tax authorities have been attempting to tax Vodafone over the 2007 sale for a long time, and the government even went so far as retroactively changing tax lawfollowing a Supreme Court decision ruling that the acquisition was not taxable as it involved two offshore holding companies.
But Vodafone has long resisted paying and is currently involved in international arbitration seeking to have the demand revoked. Now authorities have opened a new front by attempting to tax the seller in the transaction.
One of Vodafone’s arguments in resisting the claim has been that if the transaction is taxable it should be paid by the seller rather than the buyer.
CK Hutchison said the legal advice it has received is that retroactively changing the tax law to circumvent the Supreme Court verdict is in violation of the principles of international law.